Stocks: Is the Rally on Sound Footing?

Stocks: Is the Rally on Sound Footing?
Almost everyone has been surprised by the stock market's month-long run. But keeping the momentum going could be tricky

(Source: Business Week)
Recession? Financial crisis? Never mind. The stock market just finished an extraordinary month, a big surprise for even the most optimistic observers.
Stocks, measured by the broad Standard & Poor's 500-stock index, hit a low for the current bear market on Mar. 9. A month later, by the close on Apr. 9, the S&P 500 was 26.6% higher.
If this March-April advance were a calendar month, it would be the best month for the S&P 500 since 1933.
"The rally has been surprising in its length and how far it's come," says William Rutherford, president of Rutherford Investment Management. Stock gains are boosting confidence, not just among investors but in the U.S. economy as a whole, he says.
"There is a lot of upward momentum here," says Richard Sparks of Schaeffer's Investment Research. "A lot of buyers are stepping in."
Notes of Cautious Optimism
First-quarter earnings season, which began on Apr. 7, threatened to trip up the market rally. After all, amid a global recession and financial crisis, earnings for the S&P 500 are expected to drop 38%, according to Thomson Reuters (TRI).
But an early earnings announcement from Wells Fargo (WFC) sparked a rally, when the bank reported profits that were double expectations.
"Expectations for earnings season are so low that it's going to be hard to disappoint," says James King, president and chief investment officer at National Penn Investors Trust.
The fact that good news arrived from the financial sector was especially significant.
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